#1
What does the current ratio measure?
A company's ability to meet short-term obligations with its current assets
ExplanationAssesses a company's capability to cover short-term debts using available assets.
#2
Which financial ratio measures a company's efficiency in using its assets to generate revenue?
Return on Assets (ROA)
ExplanationEvaluates how well a company utilizes assets to produce income.
#3
Which financial ratio measures the proportion of a company's earnings distributed to its shareholders?
Earnings per Share (EPS)
ExplanationIndicates the portion of earnings allocated to each outstanding share.
#4
What does the inventory turnover ratio indicate?
How quickly a company sells its inventory
ExplanationShows the speed at which a company sells and replaces its inventory.
#5
What does the debt ratio measure?
The percentage of a company's assets financed by debt
ExplanationShows the proportion of a company's assets funded by debt.
#6
What does a high debt-to-equity ratio indicate?
High financial leverage
ExplanationSuggests elevated financial leverage, implying greater reliance on debt for financing.
#7
Which financial ratio assesses a company's ability to cover its interest expenses with its earnings?
Times Interest Earned (TIE) Ratio
ExplanationMeasures a company's capacity to offset interest costs with earnings.
#8
Which ratio is used to measure a company's operational efficiency by comparing its net sales to its total assets?
Asset Turnover Ratio
ExplanationAssesses how efficiently a company utilizes its assets to generate sales.
#9
What does a low price-to-earnings (P/E) ratio typically suggest?
Low investor confidence
ExplanationIndicates lower investor confidence in the company's future earnings.
#10
What does the quick ratio assess?
A company's ability to meet short-term obligations with its most liquid assets
ExplanationEvaluates a company's capacity to cover short-term debts using its most liquid assets.
#11
What does the quick ratio exclude from current assets?
Both a and c
ExplanationExcludes inventory and prepaid expenses from current assets, providing a more stringent measure of liquidity.
#12
Which ratio measures a company's ability to turn its receivables into cash quickly?
Days Sales Outstanding (DSO)
ExplanationIndicates the average time it takes for a company to collect payments after a sale.
#13
What does the times interest earned (TIE) ratio indicate?
A company's ability to cover its interest expenses with its earnings
ExplanationShows the company's capability to fulfill interest obligations with earnings.
#14
What does the net profit margin ratio indicate?
The profitability of a company after all expenses have been deducted
ExplanationShows the percentage of profit a company retains from its revenue after all expenses.
#15
What does the cash conversion cycle (CCC) measure?
The efficiency of a company's working capital management
ExplanationEvaluates how efficiently a company manages its working capital to generate cash.